Peter Grant and Nick Wingfield had a pair of interesting articles in last Friday's Wall Street Journal about some major developments for Comcast and Entertainment Arts. Both companies had a sharp decline in their net profit in the last quarter of 2005. For Comcast, the decline was 69 percent, while EA's was 31 percent.
EA's decline was almost entirely attributed to shifts in the video game industry toward new gaming systems while there was simultaneously a shortage of Xbox 360s made available for the Christmas season due to a slowdown in production that didn't meet viewer demand on behalf of Microsoft. The company predicts that 2006 will continue to see tough trends like this, as the company is investing a lot of its capital into games for the upcoming Playstation 3 platform, so that a lot of money will be spent out on preparing for projects that will not see profit this year.
For Comcast, the decline was due to litigation and tax issues, as well as stock loss on the company's Sprint Nextel holdings.
The most interesting section of the Grant's article, however, is about the ways that Comcast is combatting this loss--becoming more competitive in the realm of telephone service, as cable and telephone providers continue to go nose-to-nose. We've written about this trend in reverse as well, such as this entry back in September about Verizon's entry into the cable market (based in another great article by Peter Grant). Discussing the importance os service providers just isn't as much fun as the interesting content of the actual entertainment creators (ah, but maybe that's my humanistic bias), but this could have a major impact on the communication industry as a whole...At this point, it looks like the major players in both industries are interested in trying to hang on by claiming dominance of both...Does that mean that an even fewer group of people go home with all the winnings, or is this going to create further value for the consumer--Are we headed for even more of an oligopoly or great old-fashioned capitalist competition?